Video 8:03
Federal vs state funding fight escalates

State governments are putting pressure on the Federal Government over its plans around the Gonski report in to education, just a week after health funding was the topic of conversation between them.

Transcript

LEIGH SALES, PRESENTER: The education revolution has turned into a civil war. The Federal Government's plan to recast education funding is meeting stiff resistance from the states with Victoria leading the charge. It comes just days after the Commonwealth had to stump up more money to try to end a damaging brawl over health funding in Victoria.

Other Coalition states have weighed in, with Queensland saying the education reform plan is a dream without details.

The Prime Minister says she's up for the fight, but as political editor Chris Uhlmann reports, battling the states in an election year doesn't always end well for the Commonwealth.

CHRIS UHLMANN, REPORTER: It's more than five years since Labor came to power.

Near the top of its ambitious "To do" list was remaking the health system or taking it over.

KEVIN RUDD, THEN PRIME MINISTER: It's time to end the blame game between Canberra and the states.

CHRIS UHLMANN: And revolutionising education.

JULIA GILLARD, PRIME MINISTER: This today is a great place to be talking about Kevin Rudd's policies for an education revolution in this country.

CHRIS UHLMANN: But the Constitution prescribes that hospitals and schools are run by the states so federal calls for change demand cooperation. When Kevin Rudd was elected, every state and territory was Labor.

KEVIN RUDD: We intend to turn COAG into the workhorse of the nation.

CHRIS UHLMANN: The line-up is very different now.

The largest states are all run by Coalition governments and on education and health reform, the mood has soured.

3AW RADIO COMPERE: Is the relationship that poisonous? She says you can't run the health system.

CAMPBELL NEWMAN, QLD PREMIER: We believe in competitive federalism. One size does not have to fit all.

CHRIS UHLMANN: An election year is never a good time for sober policy discussions between the states and the Commonwealth., and on cue, the school and hospital blame games have gone into overdrive. An ugly dispute over hospital funding came to a head in Victoria last week.

TANYA PLIBERSEK, HEALTH MINISTER (Last Thursday): The Commonwealth Government has stepped in and said to the Victorian Government, "We will take Commonwealth funding that was due to go to your Treasury and redirect it into the hands of frontline hospital administrators."

CHRIS UHLMANN: The brawling over health dollars was supposed to have ended with a signing of a new health agreement in August, 2011. The Commonwealth will spend a lot more over the next decade. But this financial year, desperate to meet its now-dumped budget surplus, it recalculated its share based on new, lower-than-expected population estimates and then clawed the money back midway through the financial year. Victoria, which this year made $130 million worth of health cuts of its own, cried foul.

TED BAILLIEU: Yes, the money will be welcomed by those hospitals, but the Commonwealth in November announced $1.6 billion of cuts and all they're doing overnight is restoring to hospitals $107 million and they're saying Victoria only and they're going to punish Victoria. I tell ya, the other states are not gonna be too happy about this.

CHRIS UHLMANN: On Thursday the Commonwealth capitulated and will restore $107 million in health funding this year, but it will bypass the state, pay the money directly to hospitals and trim Victoria's funding in other areas.

JULIA GILLARD: If we see this kind of politics emerge, then as a federal government with health care funding, we will go around state governments direct to local hospital networks, we will rearrange state budgets by cutting them back in other areas. We are not going to allow state governments to play politics with health.

CHRIS UHLMANN: A new civil war flared on the weekend, with Victoria rejecting the Federal Government's plans for recasting school funding and proposing its own. It calls for more money for all schools, more consistent disability funding and a voucher system for disadvantaged students.

TED BAILLIEU: It is our ambition to see that Victorian schools enter the top tier of world schools. That's what we want for students, schools, teachers and families.

PETER GARRETT, SCHOOLS MINISTER: The Baillieu Government can't start to pick and choose around this important issue of a national plan for school improvement.

CHRIS UHLMANN: The Commonwealth's Gonski report on school funding proposes a base payment for every student with top-ups for special needs. When it's up and running it will add $6.5 billion a year to the national education bill with the burden to be split with the states. It's a lot, but Australia will spend $46 billion on education this year and the states will stump up $32 billion of that.

BEN JENSEN, GRATTAN INSTITUTE: Did you actually look at our - the decade-long increases in expenditure? That's an increase of over 40 per cent. Gonski is proposing an increase of 14 per cent. If we are going to take 10 years to get that 14 per cent increase, then we're actually looking at a decrease in the decade-long trend rate of growth in education expenditure.

CHRIS UHLMANN: The problem is that more money hasn't translated into better results. In recent years, across a range of topics, Australian children have underperformed against national and international benchmarks.

JULIA GILLARD: What we know is around 75,000 kids at the moment aren't reading as well as we would like.

CHRIS UHLMANN: And Victoria points out that it spends less than NSW on education for the same level of success.

BEN JENSEN: Therefore, their question, and I think they're correct in this, is to say why should we have a new funding formula which says we have to increase what we spend when the evidence would say that won't necessarily improve outcomes?

TED BAILLIEU: We think there's a better way. We think there's a more focused way, a more effective way and a fairer way to respond to the Gonski report.

CHRIS UHLMANN: Other Coalition states have weighed in to the brawl with Queensland's Campbell Newman saying his state's been trying to get funding details out of Canberra for months. He believes Gonski is a prime ministerial brand.

CAMPBELL NEWMAN: It's just this sexy thing you roll out to make everybody across Australia think you are going to do something about education, but again, it is a smokescreen, it is a dream, it's a shimmerer. It's yet to be real because she's not given anybody any detail.

CHRIS UHLMANN: A West Australian premier running his own election campaign launched a direct attack on the Prime Minister.

COLIN BARNETT, WA PREMIER: The style of Julia Gillard is to pick a fight with the states, run out to the media and pretend that she has a solution. Now that's falling apart on health, it's not progressing the NDIS as it should and a good, sensible Commonwealth/State relations are when you sit down and say, for example, "There are schools where children aren't getting an equal opportunity, let's work out how we tackle that."

CHRIS UHLMANN: The next meeting between the combatants is in April and the Prime Minister is not for turning.

JULIA GILLARD: We'll keep fighting and arguing for it and let me assure you, I'm well and truly up for that fight.

CHRIS UHLMANN: But time will be tight.

CHRISTOPHER PYNE, OPP. EDUCATION SPOKESMAN: And we have the ridiculous situation where the Government has had this Gonski report since November, 2011 and yet we're now in almost March, 2013 and the Government expects to get agreement from COAG in April, pass the bills in June and have the new model up and running by the end of the year when the sector and the states freely admit that it will take 12 to 18 months to introduce a new funding model.

CHRIS UHLMANN: The Government now faces a fight which recalls an earlier election, when a cashed-up but desperate John Howard declared the Commonwealth would take over running the rivers from the states.

JOHN HOWARD, THEN PRIME MINISTER (Jan. 25, 2007): I announce today a $10 billion 10-point plan on a national scale to improve water efficiency.

CHRIS UHLMANN: And he took over a single Tasmanian hospital, The Mersey.

JOHN HOWARD: It's going to be fully funded, its operation by the Commonwealth Government.

CHRIS UHLMANN: But no matter what John Howard did in 2007, he couldn't win back the people. And it's worth noting that his river plan was scuttled by Victoria. History doesn't repeat itself, but you can learn from it. Fighting the states in an election year can end in tears.